Switzerland, Currency Wars And Gold

Lots of things tugging on the price of gold today. For me, the most important factor was the threat of another devaluation of the Swiss Franc. The headlines from the Swiss papers:

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The last time we had headlines like this the EURCHF was 1.05. Not long after it was 1.21. So it’s not surprising that this time around folks ran for the hills in fear. The CHF lost 2.3% against the Euro today on just the SNB threat of “pegging up.”

Anyone who was still hanging onto the notion that the CHF was a safe haven, puked with the headlines. So more money went to gold.

If we actually do get a re-peg it would add even more fuel onto the gold price. I think we will be looking 1,900 in the rear view mirror if the SNB ups the anti.

Hildebrand has balls to leak this story over the weekend. His timing looks like a deliberate insult to the G20. The final communiqué had this to say:

We affirm our commitment to refrain from competitive devaluation of currencies.

Of course Switzerland in not in the G20 so they can ignore this altogether. They can do as they please. However, this time there might be a bit of outrage from their neighbours north, south, east and west.

I’m not sure who fired the first missile in the developing global currency war. Switzerland has already thrown up its fair share. They’re going to get hit back if they launch another.

We are (again) at zero visibility on the Franc. Better to “stay away” from this one. The flip side is that the gold story gets stronger and stronger. Look for a second tier (but cash rich) Central Bank to make an announcement of a big gold buy. After all, where else would a CB put cash these days?

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